Export hydrogen an opportunity from 100% renewables

Sept. 2 (BusinessDesk)
- Hydrogen will play an important role in de-carbonising the
New Zealand economy, but the bigger gain could be from the
development of a new export fuel industry, Energy and
Resources Minister Megan Woods says.

Hydrogen is being
investigated as a potential heavy trucking fuel, a
low-carbon process heat option and a way of reducing
emissions from natural gas use. It has also been touted as a
means of storing surplus wind and solar energy.

Woods told
journalists today the value of a domestic hydrogen economy
is “potentially huge” and will be “incredibly
important” to the country’s efforts goal of having a
net-zero carbon economy by 2050.

“But what we want to do
the work on, and talk further to industry around, is what it
could be worth as an export industry,” she said after
launching the government’s Vision for Hydrogen in New
Zealand green paper.

“Everybody knows there will need to
be some over-build in order to get to the 100 percent
renewable target. What hydrogen provides is an exciting
opportunity, is a way for us to make that over-build, that
over-capacity, economic and to actually create a whole new
export opportunity.”

In July, the Interim Climate Change
Committee urged the government to drop its target to have
100 percent renewable generation by 2035 and instead
accelerate its efforts to de-carbonise industry and
transport – sectors that are much heavier emitters.

The
committee believed the electricity system was on track to be
93-97 percent renewable by 2035 and warned that the spare
generation capacity that would have to be built to achieve
the government target would increase power costs to
consumers for little reduction in emissions.

Today’s
92-page green paper acknowledges that the current cost of
hydrogen made without hydrocarbons – so-called ‘green’
hydrogen - is “challenging”. But it also cited an
estimate from the International Energy Agency that the cost
of renewable hydrogen could fall 30 percent by 2030 due to
falling wind and solar costs and increasing production
capacity worldwide.

The paper looks at the complementary
role that hydrogen could play alongside electricity, how it
could be used in transport, industry, and to lower the
emissions from natural gas. The paper also asks for feedback
on the role government should play to facilitate those
developments, or to help develop hydrogen in “sufficient
volume” for export.

Firms including Refining NZ,
Ballance Agri-Nutrients, Ports of Auckland and Hiringa
Energy are already working on studies and pilot projects to
test the way forward on hydrogen.

Today’s paper draws on
some of that work, and also advice from Concept Consulting
and global advisory firm Arup.

Earlier this year, Concept
estimated that making hydrogen using electricity was more
than three-times the cost of product made from gas.
Including storage, renewable hydrogen was about 10-times the
cost of gas.

The firm estimated that by 2040, New Zealand
could ship renewable hydrogen to Japan at a cost of about
$44 a gigajoule, compared with a liquefied natural gas price
of $14/GJ.

Woods said long-term economics favour renewable
hydrogen, given its production cost will be falling at a
time when carbon costs make hydrogen made from natural gas
more expensive.

Countries like Japan and South Korea are
both potential export markets and New Zealand has already
agreed to work collaboratively with Japan on development of
hydrogen technologies, she said.

But she was hard-pressed
to explain how the country could develop sufficient
renewable generation – over and above that already needed
to electrify transport and industry – to support an export
hydrogen industry.

Transpower last year estimated
generation supply would have to roughly double to meet the
country’s 2050 net-zero carbon target. Back-up supplies
for peak winter loads or dry years would roughly
triple.

While she acknowledged that a hydrogen industry
may need to use gas-based product as it gets established,
Woods said there would be no government support for those
initiatives.

It is making changes to the Gas Act so that
work with hydrogen blends can get started and the government
is also looking at ways to make consenting of renewable
generation easier, she said.

It also has a role in getting
the mix right across wind, solar, hydro and geothermal and
that would be part of the government’s work on a renewable
energy strategy, she said. The government is hoping to
complete that in the coming year.

“What our primary
responsibility to do, as a government, is to make sure that
we have solid plans for how it is we’re going to reach 100
percent
renewable.”

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